Viewpoints

Digital Advertising Grows, So does Ad Fraud

Oct 26, 2016

The Growing Digital Advertising Market

The US digital advertising market is on a growth trajectory. Frost & Sullivan’s research indicates that advertisers spent approximately $55 billion on digital ads in the US in 2015, and are expected to spend nearly $100 billion by the year 2022. The key factors contributing to this growth include:

Growth in ad inventory.

Strong performance of mobile advertising.

Advancements in data-driven, intent-based advertising technologies.

Efforts of full-service ad solution providers.

Automation and scale achieved through programmatic advertising.

Growth in cross channel advertising.

Advertisers and ad agencies work with ad technology solution providers to plan, execute, and measure ad campaigns. The reporting metrics that are provided to advertisers include details such as where the ads were served, ad interactions, and what was the impact of the ads. In order to make an impact and influence the customers, it is essential that ads are served in content destinations where consumers will see them and hopefully act on them.

The Money Trail

Generally speaking, advertisers (or ad agencies) pay their technology platform providers to help them serve ads to the appropriate audience over digital channels. Technology providers keep a portion of the ad spend in exchange for services rendered (campaign planning, campaign execution, reporting, and analytics), and share the rest of the money with the content owners (also referred to as publishers) that show the ads to consumers. Ads can be priced on a per-impression or a per-action basis. Cost-per-thousand impressions (CPM) and cost-per-click (CPC) are the two main ad pricing models.

Digital Ad Fraud and the Emergence of ‘Bots’

So if the key to generate revenue is to stimulate ad impressions and ad interactions, how can these be exploited? A bot is a software application designed to automate tasks that are usually done manually. Bots can perform repetitive functions at high speeds and are implemented where a response speed faster than that of humans is required. Unfortunately, bots have also emerged as a prime mechanism for digital advertising fraud. A networked universe of computers that have been infected with bots (referred to as botnet) can be used to simulate human behavior to give the impression that the ads have been served or interacted with. This means that advertisers end up paying for a click-through or an ad impression that was triggered by a bot and not a human being.

Impact of Bots

The Association of National Advertisers (ANA), representing nearly 1,000 companies with 15,000 brands, partnered with White Ops, a leading provider of cybersecurity services to understand and educate the industry on the impact of bots in perpetuating digital ad fraud. ANA and White Ops have released two reports, one each in 2014 and 2015, that highlight the impact of bots on the digital advertising industry What ANA and White Ops found was shocking, to say the least. While there was a general understanding that fraud was not so uncommon, the magnitude of the fraud became apparent after the studies conducted by ANA and White Ops. The following are the highlights of these studies.

In 2016, advertisers are expected to lose $7.2 billion due to fraud perpetuated by bots.

The more focused the ads are more the chances of fraud. This is due to the higher pricing for targeted campaigns, and higher rewards for bot operators that can simulate the specific audience desired for an ad campaign.

Fraud has started to affect mobile advertising as well. Interestingly, a significant percentage of mobile fraud does not originate from mobile devices. In many cases, mobile-targeted ads were served to desktop-driven bots that impersonated mobile, despite having originated from major ad exchanges that were supposed to deliver mobile inventory.

Steps to Counter Fraud

Advertising technology providers are increasingly investing in technologies to improve media buying, serve genuine mobile impressions, and protect individual sites against fraud. For example, Videology, a leading provider of converged video advertising solutions has taken steps to ensure ad viewability (a metric that tracks the ability of ads to be seen by the end user) and counter fraud. It has partnered with providers such as White Ops, Integral Ad Science, DoubleVerify, and Moat to ensure high degree of accuracy and veracity in advertising campaigns. Similarly, Pandora , the leading audio content service provider has partnered with Moat to measure viewability within its app and website. More advertisers are placing legal language in their contracts to ensure that they don’t pay for fraudulent traffic, thus forcing publishers and technology providers to work to reduce the impact of bots in ad campaigns.

The Media Rating Council (MRC), a non-profit industry association established in 1963 continues to issue guidelines for invalid traffic detection and filtration. Fraud detection vendors are expected to seek MRC accreditation for their detection procedures, which will ensure that they are sufficiently capable of detecting fraud and ensuring remedial actions. Following suspension of its accreditation by the MRC, Google is reported to be working on new way to measure mobile viewability for the DoubleClick for Publishers product, which is an important development. Facebook is taking steps to ensure that it reports accurate metrics for video ads – though this is not directly related to the issue of fraud but it does indicate a strong desire on the part of the leading industry participants to ensure transparent processes.

The following are some other key developments that are expected to help the industry maintain its growth momentum by promoting quality of ad operations.

Increased focus on ROI and a stronger incentive to execute ROI-focused campaigns.

The Road Ahead

Applying manual and automated controls and implementing fraud detection at program and campaign levels have emerged as the prime mechanisms for fraud detection and prevention among leading ad tech providers. Large agencies have started putting more resources into combating ad fraud, or at a minimum, ensuring that fraudulent traffic masked as valid digital traffic is identified and not considered for ad campaigns. Self-governance on the part of the ad tech providers, along with strong impetus to move to a ROI focused ad models is good for the industry. The future is bright for providers that can ensure data fluidity across channels to deliver a transparent, fraud-free, cross-channel advertising experience for the buy side.

Vikrant Gandhi

Fourteen years of product marketing, research, and consulting expertise, which includes supporting clients’ needs through more than 140 syndicated market research deliverables and consulting assignments. Particular expertise in Assessing next-generation telecommunications trends, technologies and market dynamics; Helping clients develop and execute their go-to-market strategies; Providing continuous inputs to clients into new market developments and helping them understand the strategic implications.

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